Time Value of Money, NPV, IRR, MIRR

How Money Increases with time ??

Interest Rate (per annum) 6.00%

Time Today 1
Amount 10000 10600

What is present value of money ??

Discount Rate (per annum) 10% Reverse Interest rate

Time (in years)

Today 1
9091 10000
Amount 8264
7513
Total Present Value 24869

Net present Value

Discount Rate (per annum) 10% Reverse Interest rate

 Investment
Time 0 1
Amount -20000 10000

Present Value of returns ₹ 24,869

NPV ₹ 4,869

For a project to be financially feasible, NPV > 0

IRR
Investor Expectation 10%
Investor Expectation 20.18%

Investment
Time 0 1
Amount -200000 48000

Present Value of returns ₹ 200,000

NPV ₹0

IRR 20.18%

For a project to be financially feasible, IRR > Investor expectation.

MIRR

Discount Rate 10%

Investment
Time 0 1
Amount -20000 100

NPV ₹ -18,999.36

IRR 18%
MIRR 29%
 Time (in years)
2 3 4 5 6 7 8 9
11236 11910.16 12624.77 13382.26 14185.19 15036.3 15938.48 16894.79

Annual returns from investment made today

terest rate

Time (in years)

2 3

10000
10000

terest rate
 Returns in respective years
2 3 4 5 6 7 8 9
10000 10000

Returns in respective years

2 3 4 5 6 7 8 9
48000 48000 48000 48000 48000 48000 48000 48000

(How to Find IRR - Use Goal seek to find IRR percentage at which NPV is 0)

Returns in respective years

2 3 4 5 6 7 8 9
200 300 400 500 -600 -700 800 900

(How to Find IRR - Use Goal seek to find IRR percentage at which NPV is 0)
 10
17908.477
 10

10
48000

10
1000
Assumptions

No. of Fans 9

Cost of new fan 3000

Consumption of old fan (Rs. / month) 300
Savings from new fan 70%
Life of new fan (years) 10

Timeline (yrs) 0

Investment / Expenses

Capital Investment 27000

Operational Expense

Electricity Consumption

O&M of fans

Depreciation

Total Costs 27000

Earnings / Savings

Savings per year

Scrap Value

Total Earnings 0

Financial Indicators

Cash Flow -27000

Present Value of future cash flows ₹ 68,850.42
NPV ₹ 41,850.42
IRR 52%
 Cost of capital 12%
Increase in
Maintenance Costs 5%
(P.A)
Decrease in Savings 5%
Depreciation 10%

1 2 3 4 5 6 7

3600 3780 3969 4167 4376 4595 4824

2700 2700 2700 2700 2700 2700 2700

6300 6480 6669 6867.45 7075.8225 7294.6136 7524.344

22680 21546 20469 19445 18473 17549 16672

22680 21546 20468.7 19445.265 18473.002 17549.352 16671.88

16380 15066 13799.7 12577.815 11397.17925 10254.738 9147.5398

 8 9 10

5066 5319 5585

2700 2700 2700

7765.5615 8018.84 8284.7816

15838 15046 14294

2700

15838.29 15046.38 16994.057

8072.72835 7027.53578 8709.275035

Assumptions

No. of Fans 9

Cost of new fan 3000

Consumption of old fan (Rs. / month) 300
Savings from new fan 70%
Life of new fan (years) 10

Timeline (yrs) 0

Investment / Expenses

Capital Investment 8100

Interest Expense
Operational Expense

Electricity Consumption

O&M of fans

Depreciation

Total Costs 8100

Earnings / Savings

Savings per year

Scrap Value

Total Earnings 0

Financial Indicators

Cash Flow -8100

Present Value of future cash flows ₹ 63,226.05
NPV ₹ 55,126.05

IRR 148%
 Cost of capital 12%
Increase in Maintenance
5%
Costs (P.A)
Decrease in Savings 5%
Depreciation 10%

1 2 3 4 5 6

4932 4932 4932 4932 4932

1151.2 1151.2 1151.2 1151.2 1151.2

1200 1260 1323 1389 1459 1532

2700 2700 2700 2700 2700 2700

9983.2 10043.2 10106.2 10172.35 10241.807 4231.5379

22680 21546 20469 19445 18473 17549

22680 21546 20468.7 19445.265 18473.002 17549.352

12697 11503 10362 9273 8231 13318

 7 8 9 10

1608 1689 1773 1862

2700 2700 2700 2700

4308.115 4388.5205 4472.947 4561.5939

16672 15838 15046 14294

2700

16671.88 15838.29 15046.38 16994.057

12364 11450 10573 12432